Why Indian imports are cheaper than South African-made cars

TopAuto recently published an article examining the cost disparity between cars made and sold in India compared to the imported models brought to South Africa, which found that the local units tend to be far more expensive by the time they reach our showrooms, at least when comparing their retail prices.

Shortly afterwards, Mahindra South Africa got in touch to share additional information on India’s automotive landscape, providing valuable insights as to why India’s cars in most cases are more affordable on average than what we are paying over here.

A tale of two countries

The first reason why Indian-made cars are more expensive in South Africa is that they generally include more features and equipment as standard.

A Mahindra representative explained to TopAuto that salaries in India tend to be lower than in South Africa, which means that there is a marked difference in consumer expectations when it comes to what should be included in a new car.

Nearly all vehicles in South Africa now include items such as air conditioning, parking sensors, cameras, multiple airbags, and infotainment touchscreens as standard, as this is what local buyers have come to expect.

Of course, many Indian-made cars also have these features now, but the differences often go beyond what you’ll find on a brochure.

Indian cars imported to South Africa also have to be changed or modified to suit our environment and road conditions, which naturally incurs a higher cost to the consumer.

Motorists here tend to drive at higher speeds on average, and South Africa has a higher average elevation than India – both of which may necessitate several changes to an incoming vehicle’s drivetrain to handle the new conditions.

Additionally, Indian carmakers need to prepare their engines for South Africa’s notoriously poor fuel quality, which is an issue that has also been flagged by local manufacturers like Ford, VW, and Toyota.

All of these changes, from added features to mechanical alterations, mean that South African imports are more expensive than the models that go on sale in south Asia, even if they originated in the same factory.

Mahindra also pointed out that the sub-continent is now the world’s third-largest car manufacturer while South Africa only produces 0.7% of the global output, which means economies of scale is another factor that needs to be taken into account.

Put another way, the cost per unit of making cars is typically much cheaper in India, making it an attractive investment opportunity for companies like Suzuki, Toyota, Hyundai, and Stellantis.

Something else to consider is small cars under four metres in length are taxed at a lower rate than other vehicles in India.

This is the result of a government measure introduced in 2017 to simplify India’s tax policy and reduce prices to make cars more affordable for low-income households.

This meant scrapping the previous multi-layered tax system, which included VAT, sales tax, road tax, motor vehicle tax, and registration duties with a single Goods and Services Tax (GST), which is applied at a lower rate for small cars while luxury models and SUVs are charged more.

We also have to consider that there are several costs involved with importing and selling cars in South Africa, including a 25% import duty, customs clearance fees, harbour holding costs, VAT, a tyre levy, and an emissions tax, all of which manifest in the bill ultimately seen by consumers.

Even with all of these considerations, Indian-built cars are quite affordable in South Africa relative to their competition, which highlights an important issue.

The Suzuki Swift, for example, is one of the cheapest cars in the country with a starting price of just R219,900, despite being shipped all the way from south Asia.

In contrast, the VW Polo Vivo produced in the Eastern Cape now asks for at least R271,900, indicating that motorists are seeing no financial benefit for buying locally.

It’s a warning sign that the South African government needs to do far more to support local manufacturers, who are no longer competitive in a global marketplace while Indian and Chinese carmakers continue to dominate the affordable car scene with cheaper imports.